Wednesday, July 30, 2008

Exxon, Chevron Rely on Record Prices for Gains as Output Drops By Joe Carroll

July 30 (Bloomberg) -- Exxon Mobil Corp. and Chevron Corp. may report their lowest production since 2005, leaving investors reliant on record energy prices to drive profit gains at the largest U.S. oil companies.

Second-quarter output fell more than 5 percent, the most in at least a decade, at Irving, Texas-based Exxon Mobil, said Jason Gammel, an analyst at Macquarie Bank Ltd. in New York. San Ramon, California-based Chevron Corp. estimated July 10 that it pumped 3.4 percent less oil and gas than a year earlier.

While Exxon Mobil and Chevron will report record earnings this week, according to analyst estimates compiled by Bloomberg, the companies are having their largest stock declines since 1982 and 2002, respectively. Share drops wiped out $90 billion in market value this year, even as oil surged above $140 a barrel.

``They've been throwing a lot of money at new projects and it begs the question of how long is it going to be before we start to see production increase,'' said Barry James, who manages $2 billion, including Exxon Mobil and Chevron shares, as president of James Investment Research in Xenia, Ohio.

After its latest output decline, Chevron will need to pump 7.5 percent more petroleum in 2008's second half to meet its full-year forecast. An increase that big would be six times the biggest ever achieved by Chief Executive Officer David O'Reilly without an acquisition.

More than a third of Exxon Mobil's production drop stemmed from contracts with oil-rich nations that give governments and state-owned oil companies a bigger share of output when prices rise, Gammel said in a July 25 interview.

Spending Plans

Exxon Mobil is expected to report tomorrow that second- quarter net income rose 26 percent to $12.9 billion, the highest ever for a U.S. company without one-time gains, according to the average of seven analyst estimates compiled by Bloomberg. Chevron, which is slated to release earnings Aug. 1, probably netted $5.95 billion, an 11 percent gain, estimates indicated.

The companies held 1.4 percent of the world's proved oil and gas reserves at the end of 2007.

Exxon Mobil and Chevron budgeted almost $48 billion in capital spending this year, more than 75 percent of which is aimed at boosting production and stemming declines in reserves.

Chevron cut its 2008 forecast in February to 2.65 million barrels of oil equivalent a day, partly on the effects of price triggers in production-sharing agreements. The company fell more than 4 percent short of that pace in the second quarter.

Access Reduced

Countries such as Russia and Venezuela reduced or cut off foreign access to their oil riches, leaving international producers with fewer projects to pursue.

As Exxon Mobil and Chevron spend a combined $100 million a day to find and develop new deposits, they're funneling even more cash to stock buybacks and dividends. If it maintains its first-quarter pace of buybacks, Exxon Mobil will repurchase $38 billion of stock this year, or almost $104 million a day.

For Exxon Mobil, repurchasing stock is preferable to investing in oil and gas projects that won't produce at least a 30 percent return, James, the James Investment Research president, said in a July 25 interview.

``I like buybacks and in this environment, that's often the best investment they can make,'' James said. ``One of the things I really like about Exxon is that unless a project is going to really hit their target return, they won't do it.''

Investors want to know if the company's gas-export projects in Qatar will begin later this year as scheduled, Gammel said. The developments are slated to account for 42 percent of new output this year, Exxon Mobil's largest source.

Nigerian Project

Chevron may be close to starting its $5.4 billion Agbami development off the coast of Nigeria, the company's largest new project this year, Gammel said.

Each $1-a-barrel increase in oil prices boosts Exxon Mobil's earnings per share by 11 cents and Chevron's by 16 cents, according to William Featherston, an analyst at UBS Securities LLC.

Regardless of profit gains, the companies are struggling to show they can stop declines in output as crude prices slide from all-time highs. Oil futures closed yesterday at $122.19 a barrel on the New York Mercantile Exchange, down 17 percent from their high of $147.27 set on July 11. Exxon Mobil has dropped 14 percent this year in New York Stock Exchange composite trading. Chevron is down 11 percent.

The Standard & Poor's index of major U.S. oil companies has fallen 12 percent, the worst performance since 2002. Profits at Exxon Mobil and Chevron that year tumbled 25 percent and 66 percent, respectively.

``More important than how they did in the June quarter will be some sign of production growth going forward,'' said Robert Sweet, who helps manage $170 million at Horizon Investment Services LLC in Hammond, Indiana.

A House panel Wednesday voted to cite former top White House aide Karl Rove for contempt of Congress as its Senate counterpart publicly pursued possible punishments for an array of alleged past and present Bush administration misdeeds. Voting along party lines, the House Judiciary Committee said that Rove had broke the law by failing to appear at a July 10 hearing on allegations of White House influence over the Justice Department, including whether Rove encouraged prosecutions against Democrats.

The committee decision is only a recommendation, and it was unclear whether Speaker Nancy Pelosi, D-Calif., would allow a final vote. Rove has denied any involvement with Justice decisions, and the White House has said Congress has no authority to compel testimony from current and former advisers.

The vote occurred as members of the Senate Judiciary Committee held a hearing on allegations of administration wrongdoing ranging from discriminating against liberals at Justice to ignoring subpoenas and lying to Congress.

Rove has denied any involvement with Justice decisions, and the White House has said Congress has no authority to compel testimony from current and former advisers.

The Senate proceedings were the latest congressional review of the White House, a constitutionally mandated power that majority Democrats are eager to use. But three months from Election Day, a lame-duck Congress conducting oversight of a lame-duck White House produces mostly talk. There's little time and less willingness to spend the remaining five weeks of the congressional session doing more than holding televised hearings to try to convince voters that President Bush has abused the powers of his office.

The allegations certainly are serious.

Justice Department Inspector General Glenn A. Fine, who reported this week that former department officials broke the law by letting Bush administration politics dictate the hiring of prosecutors, immigration judges and career government lawyers, was among the witnesses to appear Wednesday before the Senate panel.

Fine said his office and Justice's Office of Professional Responsibility are investigating the prosecutor firings and whether Bradley Schlozman, former head of the department's Civil Rights Division, used political or ideological criteria to make hiring decisions.

Under questioning by Sen. Arlen Specter of Pennsylvania, the panel's senior Republican, Fine said he uncovered no evidence that any Justice officials involved made false statements to Congress or violated criminal law. Politicization of the hiring process for career positions is a violation of civil law and department policy, he said.

The Senate probe sprang from Justice's firings of nine federal prosecutors that sparked congressional investigations last year and led to the resignation of Attorney General Alberto Gonzales.

House and Senate Democrats said the findings affirmed their contention that career Justice employees were hired and fired based on whether they were deemed sufficiently conservative, a violation of law. House Judiciary Committee Chairman John Conyers said he was considering bringing criminal charges against some of the former officials named in Fine's report who may have lied to his committee. Lying to Congress is a crime, but there's little agreement among Democrats on whether a perjury referral against some of the officials is warranted.

But one Republican acknowledged there's reason to look more closely. And everyone wants more answers by the Department of Justice. The question is what will be done now in the twilight of the 110th Congress and the Bush presidency.

"I'm glad to see Attorney General (Michael) Mukasey asking to change these practices," Specter said earlier. "I'd like to see frankly a very forceful statement out of the Department of Justice as to what they intend to do."

Committee Chairman Patrick Leahy called the report's findings that "cronyism was valued over competence" and "affirmative action of the worst kind."

"The question is what Attorney General Mukasey and the president do about it to provide accountability?" the Vermont Democrat said.

Some Democrats skipped right to thinking what can be done starting in January, after a new president and Congress are installed, probably with more Democrats in their ranks.

Sen. Chuck Schumer, D-N.Y., who led the investigation into the prosecutor firings, is pressing Fine to say whether making such a disregard of civil service rules a crime would deter the kind of conduct his investigation uncovered.

Similar legislation will be considered in the House.

"I will be asking Chairman Conyers to consider legislation to ensure that the politicization of hiring of career employees at the Justice Department never happens again," Speaker Nancy Pelosi, D-Calif., said in a statement.

JUAN GONZALEZ: A congressional subcommittee has launched a probe into the use of public financing to build sports complexes like the new Yankee Stadium. The Domestic Policy Subcommittee of the House Oversight and Government Reform Committee, chaired by Ohio Congressman Dennis Kucinich, will hold hearings this September on whether land for the new stadium in the Bronx was wildly inflated to justify nearly a billion dollars in tax-free bonds.

Congressman Kucinich is looking into whether city officials overvalued the stadium site by several times its actual price. The Yankees would have avoided—or the bond-holders would have avoided millions in taxes, because they would be exempt from paying taxes on interest they earn. Meanwhile, the Yankees have requested an additional $336 million in tax-free bonds to help complete the stadium.

In a letter sent earlier this month to Yankees president Randy Levine, New York Assemblyman Richard Brodsky noted that the tax-free interest earned on the stadium bonds “normally would go into the city’s coffers to pay for schools, police and health care.”

Today, we host a discussion on public subsidies for sports stadiums. Congressman Dennis Kucinich joins us from the Capitol Rotunda in Washington, D.C. I’m also joined here in the firehouse studio by two guests: Bettina Damiani is the project director of Good Jobs New York, and Neil deMause is a writer and the author of Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit.

I’d like to begin with Congressman Kucinich. You have, as of last week, made a request to the City of New York and to the New York Yankees for a variety of documents as part of your continuing investigation into possible abuses of federal laws and IRS regulations relating to these kind of stadium projects. Could you tell us what you’re trying to do with that investigation and why you decided to focus in on New York and the Yankees?

REP. DENNIS KUCINICH: Well, this is a project that’s imminent, and we have—the thing that I think, you know, caught my attention is when you have an independent appraisal of the land that the Yankees want to get for their new stadium of $45 per square foot, and yet the city had an appraisal that appraised the same land at $275 a square foot. Now, what our committee is trying to find out is, does the city’s assessment represent a deliberate inflation of the value of the land so that there would be a greater number of tax-free bonds issued, thereby raising questions of, you know, an inappropriate increased diversion of federal tax monies for this kind of private project.

JUAN GONZALEZ: Now, you have been, for now several months, actually, questioning the IRS about the original waiver, in essence, that they gave the Yankees a few years ago and the New York Mets for the building of their hugely expensive stadiums. Could you tell our viewers and listeners what is the crux of the concern that you have with how the IRS is functioning?

REP. DENNIS KUCINICH: Well, in 1986, there was a change in the tax law which made it very clear that stadiums could not be using these tax-exempt bonds to construct these professional sports stadiums. The IRS had a ruling in a private letter that essentially gave the sports teams the ability to make payments in lieu of taxes, which was kind of a loophole that enabled them to get to the point of being able to participate in these tax-free financing schemes. And so, I’ve had a hearing where we talked to the IRS, asked them for an explanation. And from what I understand, as a result of our hearing, they’re reviewing their policies to see whether or not the 1986 Tax Reform Act has actually been compromised by the decision that they made.

I think that it’s important to understand that we’re not alleging, at this point, that there’s been any kind of criminal activity. We’re simply reviewing all the information that’s been presented to us, so that we can determine, first of all, the discrepancies in the appraisals, secondly, the public policy issue of using tax-exempt bonds for these stadiums, and third, if there is an inflated value of this project, the implication that it has for security laws with respect to the issuance of the tremendous amount of bond financing.

JUAN GONZALEZ: I’d like ask Bettina Damiani from Good Jobs New York, this whole issue of this thing called “PILOTs,” or payments in lieu of taxes, for use of repaying these tax-exempt bonds, is a very complicated issue that most the general public doesn’t understand. Your organization has been in the forefront of questioning these kinds of development deals by New York, but also, by extension, by many municipalities around the country. Could you break down how these PILOTs work generally?

BETTINA DAMIANI: Certainly. And it’s not just the average New Yorker, as we learned through the Yankee Stadium project. Most New York City and New York State elected officials don’t quite understand the issue of PILOTs, which is part of the crux of this issue.

Essentially, PILOTs are payments in lieu of taxes. Instead of paying taxes, the Yankees are paying back their tax-free bonds. So, there’s money that should be going into, as Assembly member Brodsky mentioned, the pot of money that would help pay for roads and schools and other services that New York City needs. Instead, it’s just going—it’s being completely diverted. And this, unfortunately, is a policy that is not done just with the Yankees but with a variety of other very large financial firms that have managed to make a special deal with New York City.

JUAN GONZALEZ: And in this particular case, it was actually in the interest of the New York Yankees to have a very high assessment of their land, because that would allow them to be able to float more bonds and pay more PILOTs, which is their main goal here, is to raise as much money as possible to build their stadium, right?

BETTINA DAMIANI: Exactly, and that’s the irony. And that’s one of the things that you mentioned in your article yesterday, is that in the South Bronx, the city was trying desperately to inflate the value of property, but not to benefit the larger community or the people that live in the neighborhood, but really for the sole benefit of the New York Yankees.

JUAN GONZALEZ: And, Neil deMause, you’ve been writing now for quite a while about these stadium boondoggles. Virtually every major city in America is building a new arena or a new stadium of one kind, and most of them are using some degree or other of public financing. Could you give us a sense of the overall national picture?

NEIL DEMAUSE: Sure. I mean, I think it’s absolutely correct that every major and minor city is either building a stadium or arena or being asked to estimate somewhere around $2 billion a year of public money going into these buildings, a very, very small percentage of which comes back in terms of, you know, tax benefits or actually benefits to the cities.

You know, when the Yankees and the Mets first announced their deals, Mayor Bloomberg said, “Oh, you know, we don’t make subsidies; we make investments, and we get our money back.” At the time, it was announced, well, the Yankees and Mets are going to be paying for, you know, all the construction costs of the stadium. As you look at it and break down where they’re getting tax breaks and where they’re getting sort of hidden subsidies, the taxpayers wind up paying most of the cost.

JUAN GONZALEZ: And, Congressman Kucinich, you originally had scheduled your hearing for this week but then decided to postpone it until September. Have you been in conversations with the City of New York and with the Yankees about them also testifying at your hearing? And what documents, specifically, are you trying to get from them now?

REP. DENNIS KUCINICH: Well, I could say that my subcommittee staff—and again, I’m the chair of the Domestic Policy Subcommittee, which has jurisdiction over this matter—and our subcommittee staff is in contact with officials of both the City of New York and the New York Yankees to discuss their potential appearance in front of our congressional subcommittee.

I think that it’s very important to understand that we’re looking at a public policy matter here that relates not only to New York and not only to the Nets and the Atlantic Yard project, but it also relates to the whole country, as your other guests have said, because it’s quite possible that there are billions of dollars in tax benefits that should be going to municipalities for the purposes of repairing their infrastructure and for schools and other things and that are instead being diverted for these private sports complexes.

And the question is one of public policy, one of the IRS, and in the case of the New York Yankees, questions of securities law, because of the various amounts of the appraisal, $45 a square foot versus $275 a square foot, which have a bearing on the overall cost of the project. And if the cost of the project is inflated, that’s going to be of interest to the SEC, as well as the IRS.

JUAN GONZALEZ: And in terms of the—you’re not, at this point, contemplating subpoenaing any records. You’re figuring that they are going to be—they will provide you the documents and the information that you requested to avoid that potential.

REP. DENNIS KUCINICH: Well, you know, we generally assume that we’ll get cooperation. I mean, certainly, as an investigative subcommittee, if we need to enforce that request with a subpoena, we have the ability to apply for that. But we’re not at that point yet. And, you know, we’re hopeful for cooperation on the part of all the parties involved.

And I think that, again, this is a matter of serious public policy. When you have New York City, a great American city, which has all these capital infrastructure needs, and when payments get diverted, essentially—payments are not going into areas where the city expects the tax revenues will be coming from, and instead they’re diverted in these payments in lieu of taxes, they’re intensely serious matters that need to be discussed. And so, that’s why the work that Mr. Brodsky is doing and your other guests are involved in is very significant. We’re going to continue with our work on the Domestic Policy Subcommittee, and we’ll be sure to keep you posted.

JUAN GONZALEZ: OK. We’re talking with Congressman Dennis Kucinich in Washington, and here also, Bettina Damiani of Good Jobs New York and Neil deMause, the author of Field of Schemes. We’re going to return in a minute and to continue the conversation. And before Congressman Kucinich leaves, we also want to ask him about the hearings in Congress, the potential impeachment hearings. We’ll be back in a minute.

[break]

JUAN GONZALEZ: We’re talking about the use of public subsidies for sports stadiums. We’re joined from Washington, D.C. by Ohio Congressman Dennis Kucinich. And here in New York, we have Bettina Damiani, the project director of Good Jobs New York, and Neil deMause, author of Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit.

But, Congressman Kucinich, you’ve been leading the fight for impeachment, and I know you have to go very soon, so I wanted to ask you about an interview with House Speaker Nancy Pelosi that aired on The View earlier this week. She was asked about impeachment.

JOY BEHAR: You’ve ruled against impeaching George Bush and Dick Cheney, and now Kucinich is trying to pass that. Why do you insist on not impeaching these people, so that the world and America can really see the crimes that they’ve committed?

REP. NANCY PELOSI: Well, I think that it—I think it was important, when I became Speaker—and it’s, by the way, a very important position—President, Vice President, Speaker of the House—I saw it as my responsibility to try to bring a much divided country together to the extent that we could. I thought that impeachment would be divisive for the country.

In terms of what we wanted—set out to do, we wanted to raise the minimum wage, give the biggest increase in veterans benefits to veterans in the seventy-seven-year history, then pass research for stem cell research, all of that. This week, we’re going to pass equal pay for equal work. It has been a long time in coming—pay equity. We’re going to pass legislations for product safety, for toys that children put in their—there’s an agenda that you have to get done. You have to try to do it in a bipartisan way. The President has to sign it.

If somebody had a crime that the President had committed, that would be a different story.

JOY BEHAR: Can they still do it after he’s out?

BARBARA WALTERS: When we—when I interviewed you last year, you had just begun, and you were going to clean up the mess, remember?

REP. NANCY PELOSI: And we did.

BARBARA WALTERS: You look around this country, 75 percent of the country—forget George Bush—thinks that Congress is doing a lousy job.

ELISABETH HASSELBECK: I think it’s 91 percent now.

REP. NANCY PELOSI: Well, I don’t disagree with that, because largely it’s predicated on ending the war in Iraq. That’s the main question, and we were not successful. In our House of Representatives, I’m very proud of our members, because they voted overwhelmingly over and over again to bring the war to an end, bring the troops home safely and soon, sent it to the Senate, and it hits a dead end.

But in terms of that particular standard, I would say I disapprove, as well. But we do—we passed some of the things I just mentioned, the energy bill. We worked in a bipartisan way, Innovation Agenda. We have to create jobs, expand healthcare, protect the American people and educate our children. And you can’t do that if you’re trying to impeach the President at the same time, unless you have the goods that this president committed crimes.

JUAN GONZALEZ: That was House Speaker Nancy Pelosi. Congressman Kucinich, your response to her take on the situation with impeachment?

REP. DENNIS KUCINICH: Well, now that I’ve heard that the Speaker is looking for evidence that crimes may have been committed, I certainly want to direct her attention to the thirty-five articles of impeachment that I presented, which assert quite directly that crimes have been committed, including taking this nation into a war, an illegal war, based on lies; including the deaths of over a million innocent Iraqis, which constitute a war crime; including wiretapping, rendition, torture, illegal detention. There are many examples of laws that have been broken.

And the reason why the Judiciary Committee should hold a hearing on the impeachment itself is because there needs to be a public airing of this. So, I have a great deal of respect for Speaker Pelosi, and I think that since she made that statement on The View, there’s an opportunity now for us to come forward and to lay all the facts out so that she can reconsider her decision not to permit the Judiciary Committee to proceed with a full impeachment hearing.

I just want to state this, that I appreciate that she consented to a hearing on Friday. It was a six-hour hearing, over a dozen witnesses. Twenty-four members of Congress attended. It’s being taken seriously.

I think the idea that nothing can be done right now because we’re on the eve of an election raises questions about our constitutional responsibility to be a check and balance to administration abuse of power. If in fact we’re in a war that’s based on lies, and we have thousands of troops whose lives are on the line every day, we owe it to them and we owe it to the American people to set straight the public record. And then, whether or not it results in the President being removed from office before the end of his term is another matter.

I want to further say that with the possibility of a war in Iran in the offing, a war against Iran, a war that would be a result of a pre-emptive attack, much like the one that the United States launched against Iraq, it becomes very important that we hold this administration to the highest standard of having to verify the statements they make to take us into one war and to try to take us into another.

And we’re going to continue the conversation here on the stadium issues with Bettina Damiani of Good Jobs New York and Neil deMause, author of Field of Schemes. I’d like to—again, getting back to the stadium deal, this Yankee Stadium is the most expensive stadium in the history of the United States. The actual cost is very hard to get your hands around, because there are some public infrastructure subsidies. But we’re talking about a stadium that is going to be somewhere between one and two billion dollars, when you add up all of the actual costs, probably closer to two.

And, Neil, could you talk about this—how the public expenditures are being used, even though we’re being told that they’re not being—public money is not being used directly for the stadium?

NEIL DEMAUSE: Sure. I mean, it’s something I’ve been trying to track ever since this was first announced three years ago. There is, as you mentioned, this infrastructure cost, where the public is paying for building new parks to replace the ones that were torn down to make way for the new stadium, paying for moving a water main and other things like that.

JUAN GONZALEZ: And when you say parks that were torn down, because that was, itself, a big issue—

NEIL DEMAUSE: Yeah, this—

JUAN GONZALEZ: —this is public park land, about a—what was it? Twenty acres or at least—

NEIL DEMAUSE: It was like twenty-two acres that was actually demolished. It was park that had been there even longer than Yankee Stadium that was demolished to make way for the new stadium. To make up for this, the city and state had to make sure that there was an equal amount of park land that was created. So they’re knocking down the old stadium completely. Originally, the team was talking, “Oh, we’re going to save it as a museum.” It’s going to be gone starting next year, and they’re going to put some ball fields there. And they’ve found some space down by the Harlem River where they’re going to squeeze in some tennis courts, and sort of little patchwork of parks around different places.

The public is paying for all that. The public is paying for the actual demolition of Yankee Stadium, is all going to be public. The public is paying a good chunk for building new parking garages for the Yankees, including one that will be used by the players and VIPs and various folks like that. And the team is getting all sorts of different tax breaks. As Bettina mentioned, they’re not going to be paying property taxes. They’re going to be getting mortgage-recording taxes. They’re going to be getting these tax-exempt bonds that we’ve been talking about, which is actually a tremendous amount of money, if they get the new $300 million in bonds they’re looking for. They’re going to be talking about getting more than $300 million worth of tax breaks just on the bonds themselves. So when you add it all up, you get somewhere around $900 million worth of public money that’s being spent just on Yankee Stadium.

JUAN GONZALEZ: Bettina, those who advocate these stadiums say, “Why not? This is economic development. It’s creating jobs. It’s keeping a sort of a—the psychology of the city by having a professional sports team that the residents can root for.” What’s wrong with it?

BETTINA DAMIANI: All the subsidies that Neil just listed. You would like to assume that the city and the state made a clear path to making sure that there were going to be jobs, good-paying jobs for New Yorkers, on the other end. That was going to be the investment, right? We see nothing. There’s nothing that says a certain number of jobs has to be set aside for either local New York residents or local Bronx residents, or the number of jobs at all.

The city has really washed their hands of making sure there’s any accountability on jobs and clear benefits for New Yorkers on the other side of this project, which is very unfortunate. I mean, we’re grateful for Congressman Kucinich and Assembly member Brodsky to get involved in this issue. Neither represent New York City, by the way. New York City elected officials—they’re filling a void, because local elected officials in New York City have refused to get involved in this project. And we need them. We need them to make sure that the promises in the press releases actually turn out to be something that we can hold them accountable for.

JUAN GONZALEZ: And you have, generally speaking, on this issue of tax-exempt financing for economic development, raised numerous questions over the years. It’s been one of my favorite topics, how cities are siphoning off their tax bases to create special deals for developers, whether it’s sports teams or private companies, where they’re, in essence, siphoning off the existing tax base from the municipal government and using it to fund special projects. How rampant is this, not only in New York, but throughout the country?

BETTINA DAMIANI: It’s a terrible issue regarding not only the issue of financing, but making sure that there are quality jobs for Americans and, in our case, New Yorkers. There’s a thing called the economic war among the states, where it seems that so many municipalities and states are worried about fighting one another for the headquarters of a particular agency that they’re willing to set aside basic fiscal commonsense and not making sure that there are real quality jobs on the ends of these big deals.

Site consultants are prevalent throughout the country that have really manufactured this process, and they make it seem like if the Yankees didn’t get their subsidy or if the New York Stock Exchange didn’t get a subsidy, they were going to flee somewhere else, without taking into consideration or doing some real due diligence. Where were the Yankees going to go? The Yankees are famous because they’re in the Bronx. We have a large media here. We have an incredible fan base here. And it seems none of that was taken in consideration before this huge giveaway was done.

JUAN GONZALEZ: Well, that’s one of the things I think Assembly member Brodsky is trying to investigate, because the city agency that engineered this deal, the Industrial Development Authority, apparently said that the Yankees were threatening to leave New York, of course, the most expensive media market in the country, the most desirable media market in the country. Neil, your sense of whether that was real or not?

NEIL DEMAUSE: Yeah, I mean, and I think everyone knows that the Yankees were not going to move out of New York City, and it’s kind of been an open secret for decades now, as long as George Steinbrenner has been demanding a stadium. Where is he going to go? The Yankees are not worth the, whatever, billion dollars that they’re worth if they move to Charlotte, North Carolina. But that was the pretense. And the Yankees actually told the judge in a case trying to stop the demolition of the parks, “Well, if you try and hold up this case, the Yankees could move.” And, you know, they’ve been allowed to get away with this. And as Bettina was saying, elected officials never challenged them on this, until, you know, recently Brodsky is trying—been trying to track it down.

JUAN GONZALEZ: And, of course, the final irony of all of this is, in the new stadium, once it gets built, as with all these stadiums, the ticket prices for the average baseball fan go through the roof. The prices in Yankee Stadium for box seats now are astronomical—they’re astronomical now, but what they will cost in the new stadium is unbelievable. Could you talk about some of the prices that they’ve released so far?

NEIL DEMAUSE: Yeah. I mean, they’re talking over, you know, $1,000, $2,000 a seat for some of the really premium seats. And I think what you’re going to see is—

JUAN GONZALEZ: For one game?

NEIL DEMAUSE: For one game, yes. For one game, yes, absolutely. For a whole season, you know, all bets are off. But I think, you know, what you’re going to see the Yankees do, they’ve promised to keep bleacher tickets low. They’ve promised to keep a certain number of, you know, $25-or-less seats.

I think what you’re going to see them do is, especially with Brodsky and everyone else paying attention to the soaring costs, I think you’re going to see the Yankees keep ticket prices low for the first season or two and, you know, try to say, “OK, we’re holding the line.” And then, as everybody’s clamoring to get tickets, two, three years down the road, you’ll see those start to creep up. So, what I’m worried about isn’t, next year, is it going to be affordable, but three years from now, is anybody going to be able to get a ticket?

JUAN GONZALEZ: Right. And then, of course, the final irony with—because most of these stadiums have luxury boxes that are for corporations that go from $500,000 to $800,000, in the case of the Yankees, per year to rent these boxes, and of course, my newspaper, the Daily News, reported yesterday that in this deal, the City of New York arranged to have its own luxury box at Yankee Stadium available, presumably to city officials, as part of the deal for the financing. Bettina, your response to that?

BETTINA DAMIANI: It’s aptly coined the landlord suite. And it’s just another example of how local elected officials almost seem to be void of feeling that they have responsibility to the public, because they’re going to get nice seats, in the long run.

JUAN GONZALEZ: Well, I want to thank both of you for being with us, Bettina Damiani, the project director of Good Jobs New York, and Neil deMause, who’s a writer and the author of Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit.

Al-Qaeda expert re-killed by CIA--It's Groundhog Day at the CIA By Lori Pricewww.legitgov.org30 July 2008

Abu Khabab al-Masri 'died' in January 2006 and again on Monday. Once again, the 'mainstream' media announces the re-killing of another 'key al-Qaeda operative' by a 'CIA-operated unpiloted drone!' These top al-Qaeda operatives - and their subsequent deaths - are more bountiful than poppy fields in Afghanistan or oil smuggling routes in Iraq.

The Financial Times reports:

Al-Qaeda expert killed by CIA 30 July 2008 Pakistan intelligence officials yesterday confirmed a key al-Qaeda [al-CIAduh] expert on chemical and biological weapons was killed in an attack by a CIA-operated unpiloted drone, late on Sunday. Egyptian-born Midhat Mursi al-Sayid Umar, who was also known as Abu Khabab al-Masri, was one of six Arab men who were killed in a remote region along the Afghan border, according to an intelligence official. The US had offered a $5m (€3.19m, £2.5m) reward for his capture. Western diplomats said it would be a boost to morale in the Bush administration, struggling with mounting troop casualties in Afghanistan and a revival of militant attacks in Iraq.

CBS News reports:

Officials: Al Qaeda's Mad Scientist Killed --29 Jul 2008 -- CIA Drone Targeted Chemical Weapons Expert Abu Khabab Al-Masri On Afghanistan-Pakistan Border One of al Qaeda's top chemical and biological weapons experts was killed in an air strike by a CIA pilotless drone in a remote Pakistani border region, senior Pakistani intelligence officials told CBS News Tuesday morning. Intelligence officials investigating the early Monday missile attack confirmed that Midhat Mursi al-Sayid Umar, also known as Abu Khabab al-Masri was one of six men killed and his remains had been positively identified... The timing of the report on al-Masri's death also aroused suspicion - coinciding with a visit to the White House by Pakistani Prime Minister Yusuf Raza Gilani. In the past week two U.S. officials, speaking on deep background, told CBS News that they expected Pakistan to overtly demonstrate its support for the U.S. fight against terrorism by assisting in the arrest or killing of an important Islamic militant, close to the time of Gilani's Washington trip.

But, looky here!

U.S. Strike Killed Al Qaeda Bomb Maker --18 Jan 2006 -- Terror Big Also Trained 'Shoe Bomber,' Moussaoui -- ABC News has learned that Pakistani officials now believe that al Qaeda's master bomb maker and chemical weapons expert was one of the men killed in last week's U.S. missile attack in eastern Pakistan. Midhat Mursi, 52, also known as Abu Khabab al-Masri, was identified by Pakistani authorities as one of four known major al Qaeda leaders present at an apparent terror summit in the village of Damadola early last Friday morning. The United States had posted a $5 million reward for Mursi's capture.

And here!

Abu Khabab al-Masri: A Master of Terror 18 Jun 2006 According to a growing number of media reports, a recent U.S. airstrike on a Pakistani border village has likely killed a senior Egyptian Al-Qaida commander named Midhat Mursi (a.k.a. Abu Khabab al-Masri). Since the late 1980s, Abu Khabab has served as a top military aide and deputy to Dr. Ayman al-Zawahiri in Afghanistan. Mursi was responsible for co-managing Al-Qaida's notorious Derunta military training complex near Jalalabad, where he maintained his own elite terrorist graduate school aptly named the "Abu Khabab Camp."

No worries. The New York Times covers for the Bush regime:

Bush Praises Pakistan Just Hours After U.S. Strike 29 Jul 2008 President [sic] Bush on Monday praised Pakistan’s commitment to fighting extremists along its deteriorating border with Afghanistan, only hours after an American missile strike destroyed what American and Pakistani officials described as a militant outpost in the region, killing at least six fighters. Mr. Bush, meeting with Pakistan’s prime minister, Yousaf Raza Gilani, at the White House, sought to minimize growing concerns that Pakistan’s willingness to fight extremists was waning, allowing the Taliban and Al Qaeda to regroup inside Pakistan and plan new attacks there and beyond. Senior American officials, including Secretary of State Condoleezza Rice just three days ago, publicly scolded Pakistan for not doing more to root out safe havens like the one bombed on Monday in Azam Warsak, a village in South Waziristan near the Afghan border. Among those believed to have been killed in the missile attack, evidently carried out by a remotely piloted aircraft operated by the Central Intelligence Agency, was an Egyptian identified as a senior Qaeda trainer and weapons expert, according to residents and officials in the area, as well as American officials. Neither the operative’s identity nor that of the others has been confirmed. The officials spoke anonymously because of the political and diplomatic sensitivities of attacking targets in Pakistan. The Egyptian operative, Midhat Mursi al-Sayid Umar, also known as Abu Khabab al-Masri, appears on the State Department’s list of 37 most-wanted terrorists, with a reward of $5 million for his capture... He was falsely reported to have been killed in a similar attack in January 2006 in news accounts that attributed the claim to Pakistani officials. The timing of Monday’s strike, the latest in a series by remotely piloted American aircraft inside Pakistan, coincided with the first official visit by Mr. Gilani to the United States.

EPA STAFF ORDERED TO STONEWALL INVESTIGATORS AND MEDIA -- Employees Told Not to Answer Questions or "Make Any Statements"

Washington, DC -- The U.S. Environmental Protection Agency is ordering its staff to "not respond to questions or make any statements" if contacted by congressional investigators, reporters or even by its own Office of Inspector General, according to documents released today by Public Employees for Environmental Responsibility (PEER). The order reinforces a growing bunker mentality within an EPA that is the subject of a growing number of probes into political interference with agency operations.

In a June 16, 2008 e-mail distributed throughout EPA's Office of Enforcement and Compliance Assurance, managers were asked to "remind your staff" to comply with "these important procedures." These procedures forbid staff from speaking with any reporters or representatives of the Government Accountability Office or the EPA Inspector General (IG). If contacted, EPA employees are not supposed to say anything but are to immediately refer the person to a designated public affairs official.

"Inside the current EPA, candor has become the cardinal sin," stated PEER Executive Director Jeff Ruch, noting that while this directive is of questionable legality, an agency specialist risks discipline or even termination for disregarding a direct order. "The clear intention behind this move is to chill the cubicles by suppressing any uncontrolled release of information."

By way of justification, EPA's Office of Public Affairs defends the order as "standard operating procedures" to promote efficiency and consistency in responding to official investigations. That office also contends this "procedure was developed in part to respond to a recent IG report" entitled "EPA Can Improve its Oversight of Audit Followup" issued in May 2007.

That cited IG report, however, makes no such recommendation and is primarily about how EPA lacks an accountability system for correcting admitted deficiencies identified in previous IG audits. Moreover, the cited audit has absolutely nothing to do with reporters or the Congressional GAO.

An additional concern is that the directive may illegally obstruct IG or GAO investigations. Although the EPA Public Affairs claims that the IG "signed off on" the gag order it has not offered written confirmation of that approval. Moreover, an inquiry to the EPA IG General Counsel as to the propriety of this directive has gone unanswered. Currently, the EPA Inspector General position is vacant.

Today, EPA is the target of intense scrutiny, including congressional attempts to subpoena agency files. Following increasingly contentious hearings, Administrator Johnson has even refused to appear before a Senate committee. By contrast, 25 years ago EPA Administrator William Ruckelshaus proclaimed that --

"EPA would operate 'in a fishbowl'. We will attempt to communicate with everyone ... as openly as possible."

While this 1983 Ruckelshaus "fishbowl" policy was never rescinded, it no longer reflects agency practice.

"Ironically, EPA has brought a lot of these congressional hearings on itself by not being open," added Ruch, questioning the need for such secrecy at a public health agency. "Fortunately, non-disclosure policies do not work very well as evidenced by the robust traffic in these leaked e-mails."

The Military-Industrial Complex: It's Much Later Than You Think Chalmers Johnson

Most Americans have a rough idea what the term "military-industrial complex" means when they come across it in a newspaper or hear a politician mention it. President Dwight D. Eisenhower introduced the idea to the public in his farewell address of January 17, 1961. "Our military organization today bears little relation to that known by any of my predecessors in peacetime," he said, "or indeed by the fighting men of World War II and Korea We have been compelled to create a permanent armaments industry of vast proportions We must not fail to comprehend its grave implications We must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex."

Although Eisenhower's reference to the military-industrial complex is, by now, well-known, his warning against its "unwarranted influence" has, I believe, largely been ignored. Since 1961, there has been too little serious study of, or discussion of, the origins of the military-industrial complex, how it has changed over time, how governmental secrecy has hidden it from oversight by members of Congress or attentive citizens, and how it degrades our Constitutional structure of checks and balances.

From its origins in the early 1940s, when President Franklin Delano Roosevelt was building up his "arsenal of democracy," down to the present moment, public opinion has usually assumed that it involved more or less equitable relations -- often termed a "partnership" -- between the high command and civilian overlords of the United States military and privately-owned, for-profit manufacturing and service enterprises. Unfortunately, the truth of the matter is that, from the time they first emerged, these relations were never equitable.

In the formative years of the military-industrial complex, the public still deeply distrusted privately owned industrial firms because of the way they had contributed to the Great Depression. Thus, the leading role in the newly emerging relationship was played by the official governmental sector. A deeply popular, charismatic president, FDR sponsored these public-private relationships. They gained further legitimacy because their purpose was to rearm the country, as well as allied nations around the world, against the gathering forces of fascism. The private sector was eager to go along with this largely as a way to regain public trust and disguise its wartime profit-making.

In the late 1930s and early 1940s, Roosevelt's use of public-private "partnerships" to build up the munitions industry, and thereby finally overcome the Great Depression, did not go entirely unchallenged. Although he was himself an implacable enemy of fascism, a few people thought that the president nonetheless was coming close to copying some of its key institutions. The leading Italian philosopher of fascism, the neo-Hegelian Giovanni Gentile, once argued that it should more appropriately be called "corporatism" because it was a merger of state and corporate power. (See Eugene Jarecki's The American Way of War, p. 69.)

Some critics were alarmed early on by the growing symbiotic relationship between government and corporate officials because each simultaneously sheltered and empowered the other, while greatly confusing the separation of powers. Since the activities of a corporation are less amenable to public or congressional scrutiny than those of a public institution, public-private collaborative relationships afford the private sector an added measure of security from such scrutiny. These concerns were ultimately swamped by enthusiasm for the war effort and the postwar era of prosperity that the war produced.

Beneath the surface, however, was a less well recognized movement by big business to replace democratic institutions with those representing the interests of capital. This movement is today ascendant. (See Thomas Frank's new book, The Wrecking Crew: How Conservatives Rule, for a superb analysis of Ronald Reagan's slogan "government is not a solution to our problem, government is the problem.") Its objectives have long been to discredit what it called "big government," while capturing for private interests the tremendous sums invested by the public sector in national defense. It may be understood as a slow-burning reaction to what American conservatives believed to be the socialism of the New Deal.

Perhaps the country's leading theorist of democracy, Sheldon S. Wolin, has written a new book, Democracy Incorporated, on what he calls "inverted totalitarianism" -- the rise in the U.S. of totalitarian institutions of conformity and regimentation shorn of the police repression of the earlier German, Italian, and Soviet forms. He warns of "the expansion of private (i.e., mainly corporate) power and the selective abdication of governmental responsibility for the well-being of the citizenry." He also decries the degree to which the so-called privatization of governmental activities has insidiously undercut our democracy, leaving us with the widespread belief that government is no longer needed and that, in any case, it is not capable of performing the functions we have entrusted to it.

Wolin writes:

"The privatization of public services and functions manifests the steady evolution of corporate power into a political form, into an integral, even dominant partner with the state. It marks the transformation of American politics and its political culture, from a system in which democratic practices and values were, if not defining, at least major contributory elements, to one where the remaining democratic elements of the state and its populist programs are being systematically dismantled." (p. 284)

Mercenaries at Work

The military-industrial complex has changed radically since World War II or even the height of the Cold War. The private sector is now fully ascendant. The uniformed air, land, and naval forces of the country as well as its intelligence agencies, including the CIA (Central Intelligence Agency), the NSA (National Security Agency), the DIA (Defense Intelligence Agency), and even clandestine networks entrusted with the dangerous work of penetrating and spying on terrorist organizations are all dependent on hordes of "private contractors." In the context of governmental national security functions, a better term for these might be "mercenaries" working in private for profit-making companies.

Tim Shorrock, an investigative journalist and the leading authority on this subject, sums up this situation devastatingly in his new book, Spies for Hire: The Secret World of Intelligence Outsourcing. The following quotes are a prcis of some of his key findings:

"In 2006 the cost of America's spying and surveillance activities outsourced to contractors reached $42 billion, or about 70 percent of the estimated $60 billion the government spends each year on foreign and domestic intelligence [The] number of contract employees now exceeds [the CIA's] full-time workforce of 17,500 Contractors make up more than half the workforce of the CIA's National Clandestine Service (formerly the Directorate of Operations), which conducts covert operations and recruits spies abroad

"To feed the NSA's insatiable demand for data and information technology, the industrial base of contractors seeking to do business with the agency grew from 144 companies in 2001 to more than 5,400 in 2006 At the National Reconnaissance Office (NRO), the agency in charge of launching and maintaining the nation's photoreconnaissance and eavesdropping satellites, almost the entire workforce is composed of contract employees working for [private] companies With an estimated $8 billion annual budget, the largest in the IC [intelligence community], contractors control about $7 billion worth of business at the NRO, giving the spy satellite industry the distinction of being the most privatized part of the intelligence community

"If there's one generalization to be made about the NSA's outsourced IT [information technology] programs, it is this: they haven't worked very well, and some have been spectacular failures In 2006, the NSA was unable to analyze much of the information it was collecting As a result, more than 90 percent of the information it was gathering was being discarded without being translated into a coherent and understandable format; only about 5 percent was translated from its digital form into text and then routed to the right division for analysis.

"The key phrase in the new counterterrorism lexicon is 'public-private partnerships' In reality, 'partnerships' are a convenient cover for the perpetuation of corporate interests." (pp. 6, 13-14, 16, 214-15, 365)

Several inferences can be drawn from Shorrock's shocking expos. One is that if a foreign espionage service wanted to penetrate American military and governmental secrets, its easiest path would not be to gain access to any official U.S. agencies, but simply to get its agents jobs at any of the large intelligence-oriented private companies on which the government has become remarkably dependent. These include Science Applications International Corporation (SAIC), with headquarters in San Diego, California, which typically pays its 42,000 employees higher salaries than if they worked at similar jobs in the government; Booz Allen Hamilton, one of the nation's oldest intelligence and clandestine-operations contractors, which, until January 2007, was the employer of Mike McConnell, the current director of national intelligence and the first private contractor to be named to lead the entire intelligence community; and CACI International, which, under two contracts for "information technology services," ended up supplying some two dozen interrogators to the Army at Iraq's already infamous Abu Ghraib prison in 2003. According to Major General Anthony Taguba, who investigated the Abu Ghraib torture and abuse scandal, four of CACI's interrogators were "either directly or indirectly responsible" for torturing prisoners. (Shorrock, p. 281)

Remarkably enough, SAIC has virtually replaced the National Security Agency as the primary collector of signals intelligence for the government. It is the NSA's largest contractor, and that agency is today the company's single largest customer.

There are literally thousands of other profit-making enterprises that work to supply the government with so-called intelligence needs, sometimes even bribing Congressmen to fund projects that no one in the executive branch actually wants. This was the case with Congressman Randy "Duke" Cunningham, Republican of California's 50th District, who, in 2006, was sentenced to eight-and-a-half years in federal prison for soliciting bribes from defense contractors. One of the bribers, Brent Wilkes, snagged a $9.7 million contract for his company, ADCS Inc. ("Automated Document Conversion Systems") to computerize the century-old records of the Panama Canal dig!

A Country Drowning in Euphemisms

The United States has long had a sorry record when it comes to protecting its intelligence from foreign infiltration, but the situation today seems particularly perilous. One is reminded of the case described in the 1979 book by Robert Lindsey, The Falcon and the Snowman (made into a 1985 film of the same name). It tells the true story of two young Southern Californians, one with a high security clearance working for the defense contractor TRW (dubbed "RTX" in the film), and the other a drug addict and minor smuggler. The TRW employee is motivated to act by his discovery of a misrouted CIA document describing plans to overthrow the prime minister of Australia, and the other by a need for money to pay for his addiction.

They decide to get even with the government by selling secrets to the Soviet Union and are exposed by their own bungling. Both are sentenced to prison for espionage. The message of the book (and film) lies in the ease with which they betrayed their country -- and how long it took before they were exposed and apprehended. Today, thanks to the staggering over-privatization of the collection and analysis of foreign intelligence, the opportunities for such breaches of security are widespread.

I applaud Shorrock for his extraordinary research into an almost impenetrable subject using only openly available sources. There is, however, one aspect of his analysis with which I differ. This is his contention that the wholesale takeover of official intelligence collection and analysis by private companies is a form of "outsourcing." This term is usually restricted to a business enterprise buying goods and services that it does not want to manufacture or supply in-house. When it is applied to a governmental agency that turns over many, if not all, of its key functions to a risk-averse company trying to make a return on its investment, "outsourcing" simply becomes a euphemism for mercenary activities.

As David Bromwich, a political critic and Yale professor of literature, observed in the New York Review of Books:

"The separate bookkeeping and accountability devised for Blackwater, DynCorp, Triple Canopy, and similar outfits was part of a careful displacement of oversight from Congress to the vice-president and the stewards of his policies in various departments and agencies. To have much of the work parceled out to private companies who are unaccountable to army rules or military justice, meant, among its other advantages, that the cost of the war could be concealed beyond all detection."

Euphemisms are words intended to deceive. The United States is already close to drowning in them, particularly new words and terms devised, or brought to bear, to justify the American invasion of Iraq -- coinages Bromwich highlights like "regime change," "enhanced interrogation techniques," "the global war on terrorism," "the birth pangs of a new Middle East," a "slight uptick in violence," "bringing torture within the law," "simulated drowning," and, of course, "collateral damage," meaning the slaughter of unarmed civilians by American troops and aircraft followed -- rarely -- by perfunctory apologies. It is important that the intrusion of unelected corporate officials with hidden profit motives into what are ostensibly public political activities not be confused with private businesses buying Scotch tape, paper clips, or hubcaps.

The wholesale transfer of military and intelligence functions to private, often anonymous, operatives took off under Ronald Reagan's presidency, and accelerated greatly after 9/11 under George W. Bush and Dick Cheney. Often not well understood, however, is this: The biggest private expansion into intelligence and other areas of government occurred under the presidency of Bill Clinton. He seems not to have had the same anti-governmental and neoconservative motives as the privatizers of both the Reagan and Bush II eras. His policies typically involved an indifference to -- perhaps even an ignorance of -- what was actually being done to democratic, accountable government in the name of cost-cutting and allegedly greater efficiency. It is one of the strengths of Shorrock's study that he goes into detail on Clinton's contributions to the wholesale privatization of our government, and of the intelligence agencies in particular.

Reagan launched his campaign to shrink the size of government and offer a large share of public expenditures to the private sector with the creation in 1982 of the "Private Sector Survey on Cost Control." In charge of the survey, which became known as the "Grace Commission," he named the conservative businessman, J. Peter Grace, Jr., chairman of the W.R. Grace Corporation, one of the world's largest chemical companies -- notorious for its production of asbestos and its involvement in numerous anti-pollution suits. The Grace Company also had a long history of investment in Latin America, and Peter Grace was deeply committed to undercutting what he saw as leftist unions, particularly because they often favored state-led economic development.

The Grace Commission's actual achievements were modest. Its biggest was undoubtedly the 1987 privatization of Conrail, the freight railroad for the northeastern states. Nothing much else happened on this front during the first Bush's administration, but Bill Clinton returned to privatization with a vengeance.

According to Shorrock:

"Bill Clinton picked up the cudgel where the conservative Ronald Reagan left off and took it deep into services once considered inherently governmental, including high-risk military operations and intelligence functions once reserved only for government agencies. By the end of [Clinton's first] term, more than 100,000 Pentagon jobs had been transferred to companies in the private sector -- among them thousands of jobs in intelligence By the end of [his second] term in 2001, the administration had cut 360,000 jobs from the federal payroll and the government was spending 44 percent more on contractors than it had in 1993." (pp. 73, 86)

These activities were greatly abetted by the fact that the Republicans had gained control of the House of Representatives in 1994 for the first time in 43 years. One liberal journalist described "outsourcing as a virtual joint venture between [House Majority Leader Newt] Gingrich and Clinton." The right-wing Heritage Foundation aptly labeled Clinton's 1996 budget as the "boldest privatization agenda put forth by any president to date." (p. 87)

After 2001, Bush and Cheney added an ideological rationale to the process Clinton had already launched so efficiently. They were enthusiastic supporters of "a neoconservative drive to siphon U.S. spending on defense, national security, and social programs to large corporations friendly to the Bush administration." (pp. 72-3)

The Privatization -- and Loss -- of Institutional Memory

The end result is what we see today: a government hollowed out in terms of military and intelligence functions. The KBR Corporation, for example, supplies food, laundry, and other personal services to our troops in Iraq based on extremely lucrative no-bid contracts, while Blackwater Worldwide supplies security and analytical services to the CIA and the State Department in Baghdad. (Among other things, its armed mercenaries opened fire on, and killed, 17 unarmed civilians in Nisour Square, Baghdad, on September 16, 2007, without any provocation, according to U.S. military reports.) The costs -- both financial and personal -- of privatization in the armed services and the intelligence community far exceed any alleged savings, and some of the consequences for democratic governance may prove irreparable.

These consequences include: the sacrifice of professionalism within our intelligence services; the readiness of private contractors to engage in illegal activities without compunction and with impunity; the inability of Congress or citizens to carry out effective oversight of privately-managed intelligence activities because of the wall of secrecy that surrounds them; and, perhaps most serious of all, the loss of the most valuable asset any intelligence organization possesses -- its institutional memory.

Most of these consequences are obvious, even if almost never commented on by our politicians or paid much attention in the mainstream media. After all, the standards of a career CIA officer are very different from those of a corporate executive who must keep his eye on the contract he is fulfilling and future contracts that will determine the viability of his firm. The essence of professionalism for a career intelligence analyst is his integrity in laying out what the U.S. government should know about a foreign policy issue, regardless of the political interests of, or the costs to, the major players.

The loss of such professionalism within the CIA was starkly revealed in the 2002 National Intelligence Estimate on Iraq's possession of weapons of mass destruction. It still seems astonishing that no senior official, beginning with Secretary of State Colin Powell, saw fit to resign when the true dimensions of our intelligence failure became clear, least of all Director of Central Intelligence George Tenet.

A willingness to engage in activities ranging from the dubious to the outright felonious seems even more prevalent among our intelligence contractors than among the agencies themselves, and much harder for an outsider to detect. For example, following 9/11, Rear Admiral John Poindexter, then working for the Defense Advanced Research Projects Agency (DARPA) of the Department of Defense, got the bright idea that DARPA should start compiling dossiers on as many American citizens as possible in order to see whether "data-mining" procedures might reveal patterns of behavior associated with terrorist activities.

On November 14, 2002, the New York Times published a column by William Safire entitled "You Are a Suspect" in which he revealed that DARPA had been given a $200 million budget to compile dossiers on 300 million Americans. He wrote, "Every purchase you make with a credit card, every magazine subscription you buy and medical prescription you fill, every web site you visit and every e-mail you send or receive, every bank deposit you make, every trip you book, and every event you attend -- all these transactions and communications will go into what the Defense Department describes as a 'virtual centralized grand database.'" This struck many members of Congress as too close to the practices of the Gestapo and the Stasi under German totalitarianism, and so, the following year, they voted to defund the project.

However, Congress's action did not end the "total information awareness" program. The National Security Agency secretly decided to continue it through its private contractors. The NSA easily persuaded SAIC and Booz Allen Hamilton to carry on with what Congress had declared to be a violation of the privacy rights of the American public -- for a price. As far as we know, Admiral Poindexter's "Total Information Awareness Program" is still going strong today.

The most serious immediate consequence of the privatization of official governmental activities is the loss of institutional memory by our government's most sensitive organizations and agencies. Shorrock concludes, "So many former intelligence officers joined the private sector [during the 1990s] that, by the turn of the century, the institutional memory of the United States intelligence community now resides in the private sector. That's pretty much where things stood on September 11, 2001." (p. 112)

This means that the CIA, the DIA, the NSA, and the other 13 agencies in the U.S. intelligence community cannot easily be reformed because their staffs have largely forgotten what they are supposed to do, or how to go about it. They have not been drilled and disciplined in the techniques, unexpected outcomes, and know-how of previous projects, successful and failed.

As numerous studies have, by now, made clear, the abject failure of the American occupation of Iraq came about in significant measure because the Department of Defense sent a remarkably privatized military filled with incompetent amateurs to Baghdad to administer the running of a defeated country. Defense Secretary Robert M. Gates (a former director of the CIA) has repeatedly warned that the United States is turning over far too many functions to the military because of its hollowing out of the Department of State and the Agency for International Development since the end of the Cold War. Gates believes that we are witnessing a "creeping militarization" of foreign policy -- and, though this generally goes unsaid, both the military and the intelligence services have turned over far too many of their tasks to private companies and mercenaries.

When even Robert Gates begins to sound like President Eisenhower, it is time for ordinary citizens to pay attention. In my 2006 book Nemesis: The Last Days of the American Republic, with an eye to bringing the imperial presidency under some modest control, I advocated that we Americans abolish the CIA altogether, along with other dangerous and redundant agencies in our alphabet soup of sixteen secret intelligence agencies, and replace them with the State Department's professional staff devoted to collecting and analyzing foreign intelligence. I still hold that position.

Nonetheless, the current situation represents the worst of all possible worlds. Successive administrations and Congresses have made no effort to alter the CIA's role as the president's private army, even as we have increased its incompetence by turning over many of its functions to the private sector. We have thereby heightened the risks of war by accident, or by presidential whim, as well as of surprise attack because our government is no longer capable of accurately assessing what is going on in the world and because its intelligence agencies are so open to pressure, penetration, and manipulation of every kind.

THE MISTAKE DEPARTMENTOne Example of Why American Foreign Policy is a Disasterby J. Michael Springmann7/26/08

After airplanes flew into the World Trade Towers and the Pentagon, The Los Angeles Times reported that 15 of the 19 alleged hijackers got their U.S. visas from the American Consulate General at Jeddah, Saudi Arabia, a consulate where I had served as chief of the Visa Section. What The Los Angeles Times did not report was what I had told their Washington, D.C. bureau after reading the story: (1) that the Jeddah Consulate was not a State Department post but an intelligence services operation; (2) that the Central Intelligence Agency (CIA) routinely demanded (and got) visas for sleazy characters with no ties to either their home country or Saudi Arabia; (3) that these vile people were terrorists recruited by U.S. intelligence officers along with Osama bin Laden, then a CIA asset. With the help of non-State Department officials, i.e., Consul General, Jay Philip Freres (retired and living in Clearwater, Fla.), the head of the Political/Economic Section, Eric L. Qualkenbush (retired and living in Findlay, Ohio), the Political Officer, Henry Ensher (currently assigned to D.C. and living in McLean, Va.), a Commercial Officer, Paul Arvid Tveit (retired and also living in McLean, Va.), the Chief of the Consular Section, Justice (given name) Stevens (whereabouts unknown), and a "part-time" Consular officer, Andy Weber (last seen on the PBS program "Bio-Terror"), they were sent to America for training in blowing things up and shooting things down. Afterwards, they were sent on to Afghanistan to murder Soviet soldiers. It seems pretty clear that they and people that they had trained are now pursuing their own goals (and most likely U.S. foreign policy interests) in helping destabilize Lebanon, Iraq, and Afghanistan. Their next target may be Iran.

Having been Commercial Attaché at the American Embassy in New Delhi, India (a post with a goodly number of CIA and National Security Agency, NSA, staff) and twice in Stuttgart, Germany, a Consulate with successive Consuls General sent out by the intelligence services, Douglas Jones and Day Olin Mount (both now retired, whereabouts unknown), I was still flabbergasted at the blatant disregard (and wholehearted contempt) for the Immigration and Nationality Act and the Foreign Affairs Manual (the State Department's Holy Book governing, inter alia, visa issuance). And it wasn't until I was fired for questioning these spurious visa practices that I learned what was really going on and how the system worked--to America's detriment.

Despite being given ample notice, I still did not, in fact, could not, see the coming disaster--because I trusted my government. Consider:

--My predecessor at Jeddah (Greta C. Holtz, now assigned to Washington) simply did not answer my letters asking about the situation at the Consulate, later telling me that she was "too upset" to respond. (Once there, I learned that she had been repeatedly threatened with losing her job over visa refusals, but, later, was apparently "wised-up" about the situation since she then stopped her complaining.)

--The then-American Ambassador to Saudi Arabia, Walter Cutler (who went on to head the Meridian International Center in Washington, D.C. for 17 years, promoting U.S. ties with Iran), spent 45 minutes with me before I left the U.S. In the meeting, he told me about all the problems my predecessor had caused him in refusing visas to unqualified people. When I asked the State Department Desk Officer for Saudi Arabia about this, he replied that he didn't know, "Cutler was just a queer duck".

--Again, while still in D.C., I had a chance conversation with a staff member (Ellen Goff) at the Executive Office of the-then Bureau for Near East/South Asia, learning that there were serious but unspecified problems connected with visa issuances at Jeddah.

--Upon my arrival, I was fêted for being a distinct change from my predecessor (who still has her job and is a high-ranking Foreign Service officer). Not long afterwards, things swiftly reversed themselves, and I was constantly browbeaten by the Consul General, Jay Freres, about refusing visas to unqualified applicants.

--It was not unusual for expediters carrying visa applications to the Consulate for their employers to tell me I could issue the visa then and there or, if I refused, later on, after the Consul General ordered me to.

--I was told by a contact outside the Consulate (Nestor Martin, whereabouts unknown), whom I now believe worked for the CIA, that if I spoke one word about the nefarious visa activities to a team inspecting the Consulate's operations, I would lose my job. One of the Inspectors (Joseph P. O'Neil, later retired, but afterwards assigned to various posts in Central Asia) came to me, questioned me in detail, while insisting I had to answer and that he would protect me. I did and I later lost my job.

--The Counselor for Consular Affairs in Riyadh, Stephanie Smith, (now retired and living in Florida) told me that things in Jeddah were very serious and that, on my way to my next assignment, I should speak about the disconcerting situation with the Bureau for Consular Affairs--which then professed absolutely no interest when I did so.

--After being notified that the State Department intended to pitch me out, I contacted that agency's Inspector General and the Bureau of Diplomatic Security (DS). DS agents, including Travis A. Moran, told me that I simply had had a "personality conflict" with the Consul General (who, astonishingly enough, had had a visa signature plate made and had sat at the visa window interviewing applicants, a function far below his pay grade).

At the time (before I spoke with the journalist Joe Trento, a retired government official, and a man connected to a D.C. university (not named for their safety) and learned what was really going on), I had thought the whole problem was visa fraud, i.e., someone was paying good money for a chance to come to the U.S. Fraud like this is every consular officer's nightmare and is anathema at State. According to the Bureau of Diplomatic Security's website: "[V]isa fraud is a federal offense punishable by up to 10 years in prison and a fine of $250,000. If the offense is connected...to international terrorism [the sentence is increased to 20 years]."

But, when I said "fraud" to people charge with investigating it, I was told I had a personality conflict. And I became unemployed.

There you have it. The United States of America, whose diplomatic posts are too often outposts of the CIA and NSA, was running (and, from what I can see) is likely still running a visas for terrorists program, while blaming the rest of the world for causing disasters of its own making. According to a former CIA Station Chief and a member of State's Inspector General's office, both of whom I wish to protect, at least one-third of the people who claim to work for the Department of State in reality work for one of the many U.S. intelligence agencies. In my limited experience, I would be inclined to raise that proportion which, I am inclined to believe, is increasing. (In Jeddah, all but three of the 20 or so U.S. staff worked for intelligence offices.)

Despite my best efforts, no other agency of the United States government ever wanted to deal with this matter. My Freedom of Information Act lawsuit about the reasons for my dismissal was sealed (and shut down) as a threat to national security. The Government Accountability Office took no interest in what I told them about the issue. The FBI ignored my calls, even the ones after September 11, 2001. Congress then and later also took an ostrich's view of my charges with a staffer on the House Foreign Affairs Committee once telling me that we needed the CIA.

Over the years, I wrote ever more pointed letters to Congressmen dealing with the intelligence services: to John D. Rockefeller IV, then Vice Chairman, U.S. Senate Select Committee on Intelligence; to Jane Harman, then Ranking Member, U.S. House of Representatives Permanent Select Committee on Intelligence; and to Nancy Pelosi, then Democratic Leader of the House of Representatives. I also wrote to Tom Davis, now Ranking Republican on the Committee on Oversight and Government Reform, U.S. House of Representatives, who was opposing legislation to protect national security whistle-blowers.

In those missives, I named the intelligence officers who ran the Visas for Terrorists Program and instructed the Congressmen on how to contact them. But, no action was ever taken, no question was ever raised, giving rise to my view that they knew all about the matter. And chose to ignore it.

Additionally, in the hopes of getting some action, I published several articles on the Visas for Terrorists Program, "The Hand That Rules The Visa Machine Rocks The World" in a now-defunct magazine during the Winter of 2001, and "The Visas for Terrorists Program" in Global Outlook (Triple Issue No. 11, Spring/Summer 2006). While the concept was picked up by Project Censored (25 Runners Up) 2002, and my interviews are still on the Internet, no uproar has yet been generated and no governmental action has resulted.

Why not? Any investigation would mean indictments. It would mean jail sentences. It would mean political accountability. And, as we can see from the illegal and unconstitutional wars in Iraq, Afghanistan, and, soon, Iran, no one, whether voter or politician or official, wants to deal with an uncomfortable and rather dangerous reality. It would reflect on their judgment (or lack of it) and, if faced squarely, would cause them to believe that their lives have been a lie.

J. Michael Springmann was a diplomat in the State Department's Foreign Service, with postings to Germany, India, Saudi Arabia, and the Bureau of Intelligence and Research in Washington, D.C. The published author of several articles on national security themes, he is now an attorney in private practice in the Washington, D.C.area.

The day after a video emerged of a cop knocking a cyclist to the ground, a second video alleging police brutality surfaced today in which an NYPD officer is seen whaling away at a man’s legs with a baton.

The footage - shot on July 4 on the Lower East Side - shows Officer Maurice Harrington repeatedly hitting Michael Cephus, 46, on his legs with a collapsible metal baton as he struggles with officers trying to cuff him.

Harrington - a four-year veteran working out of the 52nd Precinct in The Bronx - had his badge and gun taken away and was placed on modified duty when the tape was turned over to the department’s Internal Affairs Bureau.

The video does not show how the confrontation began. According to the criminal complaint, Harrington and fellow Officer Joel Medina said they encountered Cephus - who they thought was drunk - around 8 p.m. on Delancey Street under the Williamsburg Bridge.

When they stopped him from entering a nearby park, they said he swung an umbrella at them and struck both officers “with closed fists about the body.”

Cephus says he wasn’t drinking that day and denies having gotten physical with the officers.

“I was with some friends at a cookout,” he said. “I stepped out of the park to get some ice. The officers told me I couldn’t return because they said I had alcohol. I told them it was only ice.

“They thought I was drunk and they just came at me. They started swinging and hitting me with the batons.”

Cephus was charged with assault, criminal possession of a weapon, menacing and resisting arrest.

His attorney, Adam Orlow, said that even if his client did what he is accused of, Harrington used “excessive force.”

“Let me be clear - he is maintaining that he absolutely did not do anything they say he did,” Orlow said. “He never took a swing at them. He never was aggressive to them.” Patrolmen’s Benevolent Association president Patrick Lynch called the use of force “necessary.”

Cephus - a truck driver from Brooklyn - said that when he arrived at the police station following a trip to the emergency room, he saw the two men who shot the video. They said they had been busted for disorderly conduct. But earlier, they had managed to slip the tape to one of Cephus’ friends.

TSA ramps up program to psychologically screen airline passengersNick Langewis and David EdwardsPublished: Tuesday July 29, 2008

In addition to having your bags scanned, taking off your shoes and emptying your pockets on the way to your plane, prepare to have an on-the-spot psychoanalysis as well.

The TSA is in the process of training "behavior detection officers" to seek out involuntary physical and physiological signs of "stress, fear or deception" among air passengers to help determine who to subject to additional screening at airport security checkpoints.

SPOT, short for the Screening Passengers by Observation Technique, has so far been tested in major airports such as Boston, Providence, and Minneapolis-St. Paul. In addition, the Los Angeles Times reported, a "handful" of airports were added last December.

"There are certain thresholds that this individual needs to meet in our behavioral detection program," TSA spokesperson Andrea McCauley told KXAN. "We don't just see someone who is nervous and pull them over to talk with them."

Another TSA spokesperson, Jennifer Peppin, told the Los Angeles Times that SPOT has helped catch drug smugglers and people holding fake passports. "Have we caught actual terrorists? That remains to be seen," she said. Caroline Fredrickson of the ACLU, however, worries of profiling, adding that the program sets "a very dangerous precedent" in trying to train TSA screeners to be "behavioral scientists."

"Cultural sensitivity" is part of the week-long training regimen, the TSA insisted.

Record Year for the Pharmaceutical Lobby in '07 Washington's largest lobby racks up another banner year on Capitol Hill

By M. Asif IsmailData analysis by Helena Bengtsson

Washington, June 24, 2008 – Washington's largest lobby, the pharmaceutical industry, racked up another banner year on Capitol Hill in 2007, backed by a record $168 million lobbying effort, according to a Center for Public Integrity analysis of federal lobbying data. Among the industry's successes: getting two controversial laws extended and thwarting congressional efforts to restrict media ads for prescription drugs.

The spending represents a 32 percent jump over 2006. Driven in part by a busy legislative calendar dominated by issues critical to the industry, the effort raised the amount spent by drug interests on federal lobbying in the past decade to more than $1 billion. Pharmaceutical, medical device, and other health product manufacturers, together, spent more than $189 million on lobbying last year, another record and nearly three times the $67 million they spent in 1998, the first full year for which complete records and totals are available.

More than 90 percent of the total was spent by 40 companies and three trade groups: the Pharmaceutical Research and Manufacturers of America (PhRMA), the Biotechnology Industry Organization, and the Advanced Medical Technology Association.

The spending binge last year may have also been fueled by the previous November's Democratic takeover of Congress. After the Democratic sweep of the House of Representatives, several long-standing critics of the industry, such as Representative Henry Waxman of California, assumed leadership roles of powerful committees. Intent on closer oversight of the industry, they conducted a series of hearings on issues such as drug safety, pharmaceutical pricing, and availability of generic medicines. Waxman and some fellow Democrats also tried to give more regulatory power to the Food and Drug Administration and revisit the Medicare Prescription Drug, Improvement, and Modernization Act, a law that came into being in 2003 after heavy industry lobbying. The legislation, which resulted in the largest overhaul of Medicare in its history, provides prescription drug coverage through the program.

"After the Democratic victory in November 2006, [the industry] had to scramble," says Ira Loss, a pharmaceutical analyst with Washington Analysis Corporation. "They had to hire more Democratic lobbyists." Ken Johnson, senior vice president of communications at PhRMA, acknowledged that the industry faced "a difficult political environment." But he maintained that PhRMA doesn't see having a Democratic Congress as a disadvantage. "We don't look at it through the prism of Democrats and Republicans. We look at it in terms of those who support free market policies and those who don't."

A review of campaign contributions reveals that the industry has dramatically increased donations to the Democrats since their victory in November 2006. In the current election cycle so far, for the first time on record, the pharmaceutical and health products industry has given slightly more money to Democrats than Republicans, according to the Center for Responsive Politics. In the 2006 cycle, Democrats received only 31 percent of the contributions from the industry, while the Republicans received 67 percent.

More than $6.8 million of the $14.4 million the pharmaceutical and health product industry gave in contributions went to members of three committees that regulate the industry: the House Committee on Energy and Commerce, House Committee on Ways and Means, and Senate Committee on Health, Education, and Labor.

As in previous years, the trade group PhRMA led the drug industry in lobbying, spending close to $23 million in 2007, a 26 percent jump over 2006. Among drug companies, Amgen Inc., a biomedical firm based in Thousand Oaks, California, led by spending more than $16.2 million, and Pfizer, the world's largest pharmaceutical company, notched second with $13.8 million. Other big spenders last year included Roche Holding AG ($9 million), Sanofi-Aventis ($8.4 million), GlaxoSmithKline ($8.2 million), Johnson & Johnson Inc. ($7.7 million) and the trade group Biotechnology Industry Organization ($7.2 million).

The Industry Agenda

Lobbying disclosure reports filed with Congress reveal that pharmaceutical interests lobbied on an array of issues. Among the industry's top achievements:

blocking the importation of inexpensive drugs from other countries;protecting pharmaceutical patents both within the United States and abroad; andensuring greater market access for pharmaceutical companies in international free trade agreements. Apart from these subjects, which have become "bread and butter" issues for the industry in recent years, lobbyists focused on a handful of legislation. One such law they pushed forcefully was the reauthorization and expansion of the State Children's Health Insurance Program, or SCHIP, a federal plan that provides insurance to children. "They lobbied very hard for SCHIP," says analyst Loss. "More children insured means using more drugs." The industry had pressed to reauthorize the program for five years and expand it to cover an additional 4 million children — at a cost of $35 billion in new funding. In a rare defeat for the industry, the measures were vetoed by President Bush, who in December extended the current program for 18 months.

The industry had better luck with two other laws it lobbied robustly to extend, the Prescription Drug User Fee Act and the Best Pharmaceuticals for Children Act. Both were reauthorized in the Food and Drug Administration Amendment Act of 2007, which became law last September. The User Fee Act was enacted in 1992 in response to complaints from drug companies and patients rights advocates about long lags in drug approval. It allows the FDA to collect funds — so-called "user fees" — from the industry to employ additional drug reviewers and bring medicines faster to the market.

The law's supporters point out that, since it was enacted, the average drug review time has considerably shortened. "In my opinion, that law has worked very well," says Washington Analysis's Loss. A September 2002 study by the U.S. General Accounting Office (now the Government Accountability Office) stated that "the median approval time for new drug applications for standard drugs dropped from 27 months to 14 months" from 1993 to 2001.

But critics contend that the emphasis on faster approval time has resulted in a watering down of safety issues. The same GAO study also found that "a higher percentage of drugs has been withdrawn from the market for safety-related reasons since PDUFA's enactment than prior to the law's enactment." The FDA disagreed with that conclusion, but critics argue that the User Fee Act creates a built-in conflict-of-interest by making the FDA dependent on the industry it regulates for budgetary resources. "The FDA should be "completely funded by the taxpayers," says Melody Petersen, author of the book Our Daily Meds. "With the user fee, the FDA has two customers — us and the drug industry."

This much is clear: The FDA's reliance on user fees has increased markedly over the years, rising 17-fold since 1993. According to the 2009 budget request, the agency is slated to collect $628 million in user fees, an increase of $79 million from this year and more than a quarter of the agency's overall budget of $2.4 billion.

Another lobbying target was extension of the Best Pharmaceuticals for Children Act, a law designed to give the industry incentive for testing medicines in children by granting additional patent protection for six months. According to the agency's website, labels of 148 drugs have been changed to include the findings of pediatric tests. First enacted in 1997, the law has allowed companies to reap windfall profits while delaying the entry of low-cost generic drugs. A joint investigation by the Center and HDNet's Dan Rather Reports last year found that half of the top 20 blockbuster drugs in 2006 were given six month extensions under this law. Included were drugs not usually associated with children's health, among them two top-selling anti-cholesterol drugs, Pfizer's Lipitor and Merck's Zocor, and Sanofi-Aventis's popular sleep inducer Ambien.

Last year, some lawmakers tried to trim the windfall. Three Senate bills would have capped the additional time given to protect a company's patent, depending on how lucrative the drug was. Drugs projected to earn more than $1 billion per year would get three months — not six — of market exclusivity. The Senate passed one of these bills, but the House took no action on it. When another bill did clear both houses, the industry managed to get the exclusivity provision reauthorized without significant changes, just as it had with the User Fee legislation.

Drug companies also fought to keep Congress from limiting advertising aimed directly at the public. Consumers are hit with a daily barrage of ads for prescription drugs, targeting every condition from depression to erectile dysfunction. Industry spending on these so-called direct-to-consumer ads has jumped more than 20-fold in the past decade, helping push prescription drug sales to a record $286.5 billion last year, according to IMS Health, a consulting firm. Consumer groups have long complained that the ads have led to widespread over-prescribing of drugs.

Last June, Representative Pete Stark, an industry critic, tried to reign in the direct ads, but ran into the pharmaceutical industry's powerful lobby. The law he introduced, the Fair Balance Prescription Drug Advertisement Act of 2007, never came out of committee. The industry argued that the ads help inform patients of potential diseases and encourage people to seek treatment at an early stage. But critics were not appeased. "All you have to do is watch the ads," says author Petersen. "It is not about educating the public. It is about selling drugs."

Michael Pell, Tuan Le and Mary Beth Lombardo contributed to the story.Funding for this report was provided by the Nathan Cummings Foundation.

Thierry Meyssan 14/07/08Translated for Axis of Logic from French to English by Robert Thompson

Operation Sarkozy: how the CIA planted one of its agents as President of the French Republic.

Nicolas Sarkozy should be judged on his actions and not on his personality.

But when his actions surprise even his own electors, it is legitimate to examine in detail his biography and to ask about the alliances which brought him to power. Thierry Meyssan decided to write the truth about the origins of the President of the French Republic. All the information contained in this article is verifiable, with the exception of two imputations, pointed out by the author who assumes sole responsibility for them.

The French people, weary of the over-long presidencies of François Mitterrand and Jacques Chirac, elected Nicolas Sarkozy and counted on his energy to revitalise their country. They hoped for a break with the years of immobilism and superannuated ideologies. They have had a break with the principles which form the foundation of the French nation. They have been stupefied by this "hyper president", every day grabbing hold of another new file, drawing the right and the left to him, thus disposing of all the land-marks to the point of creating complete confusion.

Like children who have just done something very stupid, the French are too busy finding excuses to admit the extent of the damage and of their naïvety. This makes them refuse all the more to see who Nicolas Sarkozy is, which they ought to have realised long ago.

The man is clever. Like an illusionist, he has diverted their attention by offering them his private life as a spectacle and in posing in celebrity magazines, to the point of making them overlook his political history.

Let the sense of this article be fully understood: it is not to reproach Mr Sarkozy with his links of family, friends and professional contacts, but to reproach him with having hidden his links from the French people who believed that they were electing a free man.

To understand how a man in whom all agree they see an agent of the United States and Israel has been able to become the head of the Gaullist party, then the President of the French Republic, one must go back in time. Far back. We must follow a long digression during which we shall introduce the protagonists who are today taking their revenge.

Family secrets

At the end of the Second World War, the USA secret services counted on the Italo-US godfather Lucky Luciano to control the security of American ports and to prepare the allied landings in Sicily.

Luciano's contacts with the US services passed above all through Frank Wisner Sr. then, when the 'godfather' was freed and went into exile in Italy, through his Corsican 'ambassador', Étienne Léandri.

In 1958, the United States, worried about a possible victory of the FLN in Algeria which would have opened North Africa to Soviet influence, decided to give rise to a military coup d'état in France. The operation was organised jointly by the Planning Direction of the CIA - in theory run by Frank Wisner Sr.- and by NATO. But Wisner had already sunk into dementia so that it was his successor, Allan Dulles, who supervised the action. From Algiers, the French Generals formed a Committee of Public Safety which exerted pressure on the civil government in Paris and forced it to give full powers to General De Gaulle without any need to use force.

However, Charles De Gaulle was not the pawn whom the Anglo-Saxons believed they could manipulate. To start with, he tried to find a way out of the colonial contradiction by giving wide autonomy to the overseas territories within a French Union. But it was already too late to save the French Empire since the colonised peoples did not believe in the promises from the metropolis and insisted on their independence. After having successfully led fierce campaigns of repression against the independentists, De Gaulle realised what had to be done. Showing rare political wisdom, he decided to give each colony its independence.

This U-turn was seen as a betrayal by most of those who brought him to power. The CIA and NATO then backed all sorts of plots to get rid of him, including a failed putsch and some forty attempts to assassinate him. However, some of his partisans approved of his political evolution. Around Charles Pasqua, they formed the SAC, a militia to protect him.

Pasqua is both a Corsican crook and a former member of the resistance. He married the daughter of a Canadian bootlegger who made a fortune during prohibition. He ran the Ricard company which, after having dealt in absinthe, a forbidden drink, made itself respectable by selling anisette. However, the company continued to serve as a cover for all sorts of deals in relation with the Italo-New Yorker Genovese family, that of Lucky Luciano. It was therefore not surprising that Pasqua called on Étienne Léandri (Luciano's "ambassador") to recruit strong arm men and build up a Gaullist militia. A third man played an important role in the formation of the SAC, De Gaulle's former body-guard, Achille Peretti -another Corsican.

Thus protected, De Gaulle drew up with panache a policy of national independence. While confirming that he belonged to the Atlantic camp, he questioned the Anglo-Saxon leadership. He objected to the entry of the United Kingdom into the European Common Market (1961 and 1967); he refused the deployment of UNO blue helmets in the Congo (1961); he encouraged Latin American states to break free of US imperialism (speech in Mexico, 1964); he expelled NATO from France and withdrew form the Integrated Command Structure of the Atlantic Alliance (1966); he denounced the Viet-Nam War (speech in Phnon Penh, 1966); he condemned Israeli expansionism during the Six Day War (1967); he supported the independence of Quebec (speech in Montreal 1967) ; etc...

At the same time, De Gaulle consolidated France's power by giving it a military-industrial complex including a nuclear dissuasion force, and by guaranteeing its supply of energy. He usefully separated the troublesome Corsicans from his entourage by giving them overseas missions. Thus Étienne Léandri became the dealer for the Elf group (now Total), while Charles Pasqua became the confidant of the heads of state in French-speaking Africa.

Aware that he could now defy the Anglo-Saxons everywhere at the same time, De Gaulle allied himself with the Rothschild family. He chose as Prime Minister the Director of the Bank, Georges Pompidou. The two men formed an efficient tandem. The political audacity of the first never lost sight of the economic realism of the second.

When De Gaulle resigned, in 1969, Georges Pompidou briefly succeeded him as President before being carried off by cancer. The historical Gaullists did not accept his leadership and were worried by his excessively anglophile attitude. They cried treason when Pompidou, seconded by the Secretary General of the Elyse Eduard Balladur, allowed "perfidious Albion" into the European Common Market.

The making of Nicolas Sarkozy

Having thus described the background, let us come back to our principal personage, Nicolas Sarkozy. Born in 1955, he was the son of a Hungarian nobleman, Pal Sarkösy de Nagy-Bocsa, who fled to France after fleeing the Red Army, and Andrée Mallah, a Jewish lady from Sallonica. After having had three children (Guillaume, Nicolas and François), the couple divorced. Pal Sarkösy de Nagy-Bocsa remarried with an aristocrat, Christine de Ganay, by whom he had two children (Pierre-Olivier and Caroline). Nicolas was not brought up by his parents alone, but passed to and fro in this recomposed family.

His mother became the Secretary of Achille Peretti. After having co-founded the SAC, De Gaulle's body-guard had pursued a brilliant political career. He was elected Député and Mayor of Neuilly-sur-Seine, the richest suburb of the capital, then President of the National Assembly.

Unhappily, in 1972, Achille Peretti was subject to serious accusations. In the United States, the magazine Time revealed the existence of a secret Corsican criminal organisation the 'Union corse ' which was said to control a large share of the traffic in drugs between Europe and America, the famous "French connection" which Hollywood brought to the screen. Based on parliamentary hearings and its own investigations, Time quoted the name of a Mafia boss, Jean Venturi, arrested some years earlier in Canada, who was no other than the commercial representative of Charles Pasqua for the drinks company Ricard. The names of several families were mentioned who were said to run the "Union corse", including the Perettis. Achille denied this, but had to resign from the presidency of the National Assembly and even escaped from a "suicide".

In 1977, Pal Sarközy separated from his second wife, Christine de Ganay, who then linked herself with the number two of the central administration of the Department of State in the United States. She married him and set up home with him in America. The world being small, as is well known, her husband was no other than Frank Wisner Jr., the son of the previous one. The functions of Junior at the CIA are not known, but it was clear that he had an important role there. Nicolas, who remained close to his step-mother, his half-brother and his half-sister, began to turn towards the United States where he "benefitted" from training programmes in the Department of State.

At the same time, Nicolas Sarkozy joined the Gaullist Party. He there met and had contacts with Charles Pasqua more speedily as he was not only a national leader, but also in charge of the local section in the Hauts-de-Seine.

In 1982, Nicolas Sarkozy, having completed his legal training and having been called to the Bar, married Achilles Pretty's niece. His best man was Charles Pasqual. As an Avocet, Maître Sarkozy looked after the interests of the Corsican friends of his mentors. He bought a property in Corsica, at Vice, and thought of making his name more Corsican by replacing the 'y' with an 'I': Sarkozy.

The following year, he was elected Mayor of Neuilly-sure-Seine in the place of his uncle-in-law, Achilles Pretty, stricken by a heart attack.

However, Nicolas did not take long to betray his wife and, from 1984 onward, he had a hidden liaison with Cecilia, the wife of the most famous French television personality at the time, Jacques Martin, whom he had met when celebrating their marriage as Mayor of Neuilly. This double life lasted for five years, before the lovers left their respective spouses to set up a new household.

Nicolas was a witness at the marriage, in 1992, of Jacques Chirac's daughter, Claude, to an editorialist at Le Figaro. he could not stop himself from seducing Claude and to have a brief affair with her, while living officially with Cecilia. The betrayed husband committed suicide by taking drugs. The break between the Chirac's and Nicolas Sarkozy was brutal and permanent.

In 1993, the left lost the parliamentary elections. President François Mitterrand refused to resign and entered into a cohabitation with a Prime Minister from the right, Jacques Chirac. His ambition was to become President and thought of then forming a tandem with Eduard Balladur comparable with that of De Gaulle and Pompidou, and he refused to be Prime Minister again and left the place to his "friend for over thirty years", Eduard Balladur. Despite his dubious past, Charles Pasqual became Minister of the Interior. Even if he kept a firm grip Moroccan marijuana, he took advantage of his position to legalise his other activities by taking control of the casinos, gaming and racing in French-speaking Africa. He also established links in Saudi Arabia and in Israel an became an honorary officer in the Mossad. As for Nicolas Sarkozy, he was Minister of the Budget and government spokesman.

In Washington, Frank Wisner Jr. took over from Paul Wolfowitz as being responsible for political planning in the Defence Department. Nobody commented on the links which he had with the French government's spokesman.

This was when the tension within the Gaullist Party came back as thirty years earlier between the historic Gaullists and the financial right, in the person of Balladur. The novelty was that Charles Pasqua and with him the young Nicolas Sarkozy betrayed Jacques Chirac to come closer to the Rothschild tendency. Everything went wrong. The conflict reached its peak in 1995 when Édouard Balladur put himself forward against his ex-friend Jacques Chirac for the presidential election, and was beaten. Above all, following the instructions received from London and Washington, the Balladur government opened negotiations for adhesion to the European Union and to NATO of the States in Central and Eastern Europe, freed from Soviet control.

Everything went wrong in the Gaullist Party where the friends of yester-year were ready to kill one another. To finance his electoral campaign, Édouard Balladur tried to get hold of the Gaullist Party's black funds, hidden within the double accounting system of the oil company Elf. Hardly had the old Étienne Léandri died, when Judges looked into the company and its bosses were incarcerated. But Balladur, Pasqua and Sarkozy never managed to recuperate the booty.

Crossing the desert

Throughout his first term, Jacques Chirac kept Nicolas Sarkozy at a distance. The man became discreet during this long period of crossing the desert. Discreetly, he continued to make links in financial circles.

In 1996, Nicolas Sarkozy having finally managed to end an endless divorce procedure married Cécilia. As witnesses they had the two billionaires Martin Bouygues and Bernard Arnaud (the richest man in the country).

Last act

Well before the Iraq crisis, Frank Wisner Jr. and his colleagues at the CIA were planning the destruction of the Gaullist line and the rise in power of Nicolas Sarkozy. They acted in three stages: firstly the elimination of the leaders of the Gaullist Party and taking over this body, then the elimination of the principal rival on the right and the investiture by the Gaullist Party for the presidential election, and finally the elimination of any serious challenger from the left in order to be sure of carrying off the presidential election.

For years, the media were kept excited by posthumous revelations by a real property speculator. Before dying of a serious illness, he had registered for reasons never made clear a video confession. For even more obscure reasons, the "cassette" fell into the hands of a highly placed member of the Socialist Party, Dominique Strauss-Khan, who passed it on indirectly to the press.

Even if the confessions of the speculator did not lead to any judicial sanction, they opened a Pandora's box. The principal victim of the successive affairs was to be the Prime Minister Alain Juppé. To protect Chirac, he alone took on all the criminal offences. Putting Juppé out of the way left the way clear for Nicolas Sarkozy to take over the running of the Gaullist Party.

Sarkozy then made use of his position to force Jacques Chirac to take him back into the government, despite their mutual hatred. He was definitively to be the Minister of the Interior. What a mistake! In this post, he controlled the Préfets and the interior intelligence network which he used to put his appointees into the major branches of the administration.

He also dealt with Corsican matters. The Préfet Claude Érignac had been assassinated. Although no-one had claimed it, the murder was immediately interpreted as a challenge made by the independentists to the Republic. After a long hunt, the police managed to arrest a fleeing suspect, Yvan Colonna, the son of a Socialist Député. Without regard for the presumption of innocence, Nicolas Sarkozy announced this arrest accusing the suspect of being the assassin. This news was too good two days before a referendum being organised by the Minister of the Interior in Corsica to modify the status of the Island. However that may be, the voters rejected the Sarkozy project which, according to some, favoured Mafia interests.

Although Yvan Colonna was later found guilty, he has always claimed his innocence and no material evidence has been found against him. Strangely, the man refused to talk, preferring to be found guilty than to reveal what he knows. We here reveal that the Préfet Érignac was not killed by nationalists, but shot by the hit-man, Igor Pecatte, immediately sent off to Angola where he has been taken on by the Elf group. The motive for the crime was closely linked to the previous functions of Érignac, in charge of the African networks of Charles Pasqua at the Ministry of Cooperation. As for Yvan Colonna, he has been a personal friend of Nicolas Sarkozy for many years and their children are in friendly contact with one another.

A new affair came to light: false listings were circulating which untruthfully accused certain personalities of hiding bank accounts in Luxembourg, with Clearstream. Among the personalities defamed: Nicolas Sarkozy. He took the case to court and let it seem that his right-wing rival for the presidential election, the Prime Minister, Dominique de Villepin, had organised this machination. He did not hide his intention to have him sent to prison. In reality, the false listings were put in circulation by members of the Franco-American Foundation, of which John Negroponte was the President and Frank Wisner Jr. the Director. What the Judges did not know and we reveal here was that the listings were made in London by a joint office of the CIA and the MI6, Hakluyt & Co, of which Frank Wisner Jr. is also Director. Villepin fights back against the accusations, but he is charged, forbidden to leave his home and, de facto, temporarily removed from political life. The way is open for on the right for Nicolas Sarkozy.

It remained necessary to neutralise opposition candidates. The membership dues to the Socialist Party have gone down to a symbolic level to attract new members. Suddenly thousands of young people applied for membership cards. Among them are at least ten thousand new members who are in reality members of the Trotskyite "Lambertist" Party (so called from the name of their founder Pierre Lambert). This small extreme left formation has a history of working for the CIA against the Stalinist communists during the Cold War (it was the equivalent of the SD/USA of Max Shatchman, which formed the neoconservatives in the USA). This was not the first time that the "Lambertists" had infiltrated the Socialist Party.

In particular they planted two famous CIA agents: Lionel Jospin (who became Prime Minister) and Jean-Christophe Cambadélis, the principal adviser to Dominique Strauss-Kahn.

Primaries were organised in the Socialist Party to appoint its candidate for the presidential election. Two personalities were competing: Laurent Fabius and Ségolène Royal. Only the first represented a danger for Sarkozy. Dominique Strauss-Kahn became a candidate with the task of eliminating Fabius at the last moment. This he was able to do thanks to the votes of the infiltrated "Lambertist" militants who voted not for him but for Royal. The operation was possible because Strauss-Kahn, of Moroccan Jewish origin, had been on the US payroll for many years. The French were not aware that he lectured at Stanford, where he had been taken on by the Provost of the University, Condoleezza Rice. As soon as he took office, Nicolas Sarkozy and Condoleezza Rice thanked Strauss-Kahn by having him appointed to head the International Monetary Fund.

First days at the Élysée Palace

On the evening of the second round of the presidential election, when the opinion polls announced his probable victory, Nicolas Sarkozy made a short speech to the nation from his campaign HQ. Then, contrary to custom, he did not go to celebrate with the militants of his party, but went to Fouquet's. The famous restaurant on the Champs-Élysées, which had once been the meeting place for the "Union Corse" now belongs to the casino operator Dominique Desseigne. It was placed at the disposition of the elected President to receive his friends and principal donors to his campaign. A hundred or so guests crowded in, the richest men in France were there with the casino bosses.

Then the elected President allowed himself a few days of earned rest. Taken there in a private Falcon-900 to Malta, he rested there on the Paloma, the 65 metre yacht of his friend Vincent Bolloré, a billionaire formed at the Banque Rothschild.

Finally, Nicolas Sarkozy was invested as President of the French Republic. The first decree which he signed was not to proclaim an amnesty, but to allow casinos to be operated by his friends Desseigne et Partouche and increase the number of gambling machines.

He formed his working team and his government. With no surprise, one finds there a very worrying casino owner (Minister of Youth and Sport) and lobbyist for the casinos of his friend Desseigne (who became spokesman for the "Gaullist" Party).

Nicolas Sarkozy relied above all on four men: Claude Guéant, Secretary General of the Élysée Palace. He was the former right arm of Charles Pasqua. François Pérol, Assistant Secretary General of the Élysée. He was a managing partner of the Banque Rothschild. Jean-David Lévitte, diplomatic adviser. Son of the former Director of the Jewish Agency. French Ambassador to UNO, he was removed from his post by Chirac who considered him too close to George Bush. Alain Bauer, the man in the shadow. His name does not appear in any directory. He is in charge of the intelligence services. Grandson of the Grand Rabbi of Lyon, former Grand-Master of the Grand Orient of France (the principal Masonic obedience in France) and former number 2 of the USA National Security Agency in Europe.

Frank Wisner Jr., who had in the meantime been appointed special envoy by President Bush for the independence of Kosovo, insisted that Bernard Kouchner be appointed Minister for Foreign Affairs with a dual priority mission: The independence of Kosovo and the ending of France's Arab policy.

Kouchner, of Baltic Jewish origin, started his career by taking part in creating a humanitarian NGO. Thanks to money from the National Endowment for Democracy, he took part in operations for Zbigniew Brzezinski in Afghanistan, alongside Osama Ben Laden and the Karzaï brothers against the Soviets. He could be found in the 90s alongside Alija Izetbegoviç in Bosnia-Herzegovina. From 1999 to 2001, he was the High Representative of UNO in Kosovo.

Under the control of the younger brother of President Hamid Karzaï, Afghanistan became the largest producer in the world of opium poppies. The juice is transformed on the spot into heroin and transported by the US Air Force to Camp Bondsteed (Kosovo). There the drug is taken over by the men of Haçim Thaçi who distribute it principally in Europe and also in the United States. The profits are used to finance the illegal operations of the CIA. Karzaï and Thaçi are long-time personal friends of Bernard Kouchner, who obviously knows nothing of their criminal activities despite the international reports which have been made on the subject.

To complete his government, Nicolas Sarkozy appoints Christine Lagarde, Minister of Economy and Finance. She had made all her career in the United States where she ran the prestigious law firm of Baker & McKenzie. Within Dick Cheney's the Center for International & Strategic Studies, she co-chaired with Zbigniew Brzezinski a working group which supervised the privatisations in Poland. She had organised intense lobbying for Lockheed Martin against the French aircraft manufacturer Dassault.

A new escapade during the summer. Nicolas, Cécilia, their joint mistress and their children were offered holidays in the USA at Wolfenboro, not far from President Bush's property. The bill this time was paid by Robert F. Agostinelli, an Italo-New York merchant banker, a Zionist and a leading neo-conservative who gives his views in Commentary, the magazine of the American Jewish Committee.

The success of Nicolas spreads to his half-brother Pierre-Olivier. Under the Americanised name of "Oliver", he was appointed by Frank Carlucci (who was the number 2 of the CIA after having been recruited by Frank Wisner Sr.) Director of a new investment fund of the Carlyle Group (the joint management company of the portfolios of the Bushes and the Ben Ladens). Having become the 5th deal-maker in the world, he manages the principal assets of the sovereign funds of Kuwait and Singapore.

The popularity of the President is in free-fall in the opinion polls. One of his advisers in communication, Jacques Séguéla, planned to distract the attention of the public with new "celebrity stories". The announcement of the divorce from Cécilia was published by Libération, the newspaper of his friend Édouard de Rothschild, to cover up the demonstrators' slogans during a day of general strikes. Going further still, the communicator organised a meeting with the singer and former model, Carla Bruni. Several days later, her affair with the President became official and the media din again covered up the political criticisms. A few weeks later still and it was Nicolas' third marriage. This time the witnesses whom he chose were Mathilde Agostinelli (the wife of Robert) and Nicolas Bazire, former private secretary of Édouard Balladur who had become a managing partner at the Banque Rothschild.

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